KATHMANDU, MAY 11
As the government has curbed the import of certain non-essential goods, the foreign exchange reserves of Nepal witnessed a slight uptick, increasing by $30 million in the ninth month of the current fiscal.
The macroeconomic update unveiled by the Nepal Rastra Bank today reveals that the gross foreign exchange of the country stood at $9.61 billion in mid- April, compared to $9.58 billion in mid-March. However, it was down 18.2per cent in the review month from $11.75 billion in mid-July.
During the nine months of 2021-22, merchandise exports jumped by 69.4 per cent to Rs 160.57 billion compared to an increase of 20.2 per cent in the same period of the previous year. Exports of palm oil, soyabean oil, polyester yarn and thread, woollen carpets, oil cakes, among others, increased whereas exports of cardamom, tea, wire, toothpaste, copper wire rod, among others, de-creased in the review period.
At the same time, merchandise imports surged by 32 per cent to Rs 1,466.66 billion compared to an increase of 13.1 per cent a year ago. Destination-wise, imports from India, China and other countries increased 24.4 per cent, 28.6 per cent, and 59.2 per cent respectively.
Imports of petroleum products, medicine, crude palm oil, other machinery and parts, gold, among others, rose whereas imports of MS billet, chemical fertiliser, cement, pulses, molasses sugar, among others, fell in the review period.
The total trade deficit widened by 28.5 per cent to Rs 1,306.09 billion during the nine months of 2021-22, against 12.5 per cent increase in the corresponding period of the previous year.
Based on the imports of nine months of 2021-22, the foreign exchange reserves of the banking sector is sufficient to cover the prospective merchandise imports of 7.4 months, and merchandise and services imports of 6.6 months, as per the centralbank report.
In a bid to control the outflow of the country's dwindling foreign exchange reserves, the government has banned the import of non-essential items listed under 10 categories. Issuing a notice on Nepal Gazette on April 26, the Ministry of Industry, Commerce, and Supplies had announced that import of 'luxury' items had been banned for the rest of this fiscal, which ends in mid-July. Along with all types of alcohol and tobacco products, large-engine motorcycles and mobile phones costing over $600, the ban also forbids import of toys, playing cards, and diamonds. Also on the list of items prohibited from imports are snacks, such as Lays and Kurkure.
Likewise, the Nepal Bankers' Association (NBA), an umbrella organisation of commercial banks had also decided not to issue letters of credit (LCs) for the import of non-essential goods.
According to NBA, the LCs will not be issued for the import of luxury items such as vehicles, gold, silver, sugar, chewing gum, dry foods, furniture, cigarettes, alcohol, perfume and mobile phones, among others.
Meanwhile, the current account remained at a deficit of Rs 512.71 billion in the review period compared to a deficit of Rs 210.51 billion in the same period of the previous year. The BoP deficit stood at Rs 268.26 billion in the review period against a surplus of Rs 42.54 billion in the same period of the previous year.
Remittance inflows decreased 0.6 per cent to Rs 724.74 billion in the review period against an increase of 16.5 per cent in the same period of the previous year.
A version of this article appears in the print on May 12, 2022, of The Himalayan Times.
